The Best Time to Pay Your Mortgage Payment

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Your monthly mortgage payment may be your biggest and most important monthly bill. The timing and method that you use to pay your mortgage can help you save thousands on your overall debt repayment.

Method of Payment

A majority of the time, when you close your mortgage with an attorney or a title company, the company includes an automatic debit form for you to fill out. This is the preferred method for most companies to collect their customers' payments. This form allows the mortgage company to debit directly from your checking or savings account each time a payment is due. This keeps you from paying late fees and sometimes gives you a better rate on your mortgage.

You can also choose to use a coupon booklet or to pay online. Both options give you the control to pay out of multiple accounts on whatever day you choose, as opposed to the mortgage holder choosing the date and account. With these options, you can elect to pay an additional amount towards your principal with each payment.

Timing of Payment

Most companies set up a due date of the first of the month and require one monthly payment. This has been the industry standard for years. Yet, if you have the option to choose your date and your frequency of payment, you can save thousands of dollars in interest over the life of the loan.

Set up your payment as close to your payday as possible. This way, your mortgage payment is the first item to come out of that paycheck and, therefore, you know that it is covered.

Additionally, if you can select a bi-weekly payment as opposed to a monthly payment, you can save money over the life of the loan. This option has you make 26 payments per year versus 12 payments. This is the equivalent of making 13 monthly payments in one year's time, but is more budget friendly than having to make one full extra month's payment in one check. Simply by paying bi-weekly on a 30-year mortgage, you can reduce the life of your loan almost seven years. If you pay additional principal along the way you will save even more.

Importance of Payment

If you do not pay your mortgage or are late, you can suffer consequences that are much larger than your late fee. For example, if you have one mortgage payment that is 30 days late, you will not be able to refinance that mortgage or purchase another home with a mortgage for one full calendar year. A single mortgage payment that is 60 days late prevents you from getting a new mortgage for two years. Additionally, if you go into foreclosure or bankruptcy, a majority of companies make you wait at least two years before you can get a new mortgage.

So, make your mortgage payments first, before all other household bills. Make bi-weekly payments and you will end up owning your house free and clear before you know it.

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